Medicare Gets Another Free Pass Under Michigan No-Fault Auto Law

It is getting tough to be an MSP expert these days because, of late, it also requires that you be an expert in all things touched by the MSP, and those possibilities appear endless. My latest inquiry required me to understand Michigan no-fault auto insurance laws and I am sharing because I found this interesting. Here is yet another way that, despite paying into the Medicare system throughout your entire work-life, you can still be denied benefits.

The individual who wrote to me was called by her auto insurer and informed that because she is a Medicare beneficiary, she would need to pay an additional $250/month for PIP to cover any injuries that may be sustained in an auto accident. Given that her cars are fully covered through her bank financing and she is enrolled in Medicare Parts A, B & D and MediGap, she found it hard to believe that she is not already covered for an auto accident, and as it turns out, she is not.

An insurer providing personal protection insurance benefits shall offer, at appropriately reduced premium rates, deductibles and exclusions reasonably related to other health and accident coverage on the insured. The deductibles and exclusions required to be offered by this section shall be subject to prior approval by the commissioner and shall apply only to benefits payable to the person named in the policy, the spouse of the insured and any relative of either domiciled in the same household.

Essentially, by law, Michigan no-fault insurers are permitted to ask about other coverage with medical benefits, exclude coverage because of it, and adjust rates accordingly. The intent was to eliminate duplicative recovery by an insured from both a health insurer and a no-fault insurer and to contain or reduce no-fault and health care insurance costs. Think of it like the collateral source rule but, rather than preventing someone else’s auto insurer from benefiting because you have enough foresight to carry health insurance and because you carry your own coverage in a no-fault situation, you don’t have to pay twice for different types of insurance to cover medical treatment for yourself. If you have health insurance, you get a discount on your auto since the statute permits an exclusion from providing duplicative coverage.

However, because Medicare is statutorily excluded from providing coverage in a no-fault situation under the MSP, entitlement to Medicare doesn’t have the same effect on rates as say a BC&BS private policy or your employer’s group health plan, despite your having paid payroll taxes throughout your entire work life to acquire this entitlement. Since its inception in 1965, Medicare is meant to be a primary form of insurance for the elderly at a time when they anticipate a fixed income, so it seems counterintuitive that the entitlement would cause elderly drivers to pay more for auto insurance when they become Medicare beneficiaries. But before I climbed up on my constitutional soapbox to scream for equal protection, I did verify that the statute was deemed constitutional by the Supreme Court of Michigan in 1979 in O’Donnell v. State Farm, 404 Mich. 524 (1979), and because it predated the MSP enactment, I dug up cases like LeBlanc v. State Farm, 410 Mich. 173 (1981) that specifically found that “other health and accident coverage” included Medicare. So Mary, your beef is not with Medicare but your state legislature; however, given that you have obviously been experiencing lower auto premiums than the rest of us in non-no-fault states for most of your adult life, I am not sure you are going to find much sympathy.

In response to your question of whether the $250 PIP election is a must for seniors in Michigan, I am not going to tell you what you should and shouldn’t do. I will, however, tell you that if you don’t have PIP coverage and Medicare does make payments for any accident related treatment, then it will be entitled to reimbursement for those payments. If you are the target of its recovery efforts, understand that through the various laws that cover debt collection by the federal government, one method it uses is off-setting money it owes you, so things like Social Security and tax return checks are susceptible. Therefore, just as with any other insurance decision in your life, only you can decide what your risks are and how to best protect yourself from them.

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To amend title XVIII of the Social Security Act to provide for the application of Medicare secondary payer rules to certain workers' compensation settlement agreements and qualified Medicare set-aside provisions